Decision-making in an uncertain worldA Chevron case study

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Page 1: Introduction

Modern organisations operate within an environment of change. There are all sorts of factors that change within this environment - for example, the market price of products and raw materials, the level of competition, market opportunities, changing government legislation and, of course, technology.

This case study focuses on the way in which the oil company, Chevron, developed flexible solutions to enable it to cope with the environment of change. In particular, it shows how Chevron has successfully developed flexible decision-making for the development of its North Sea Alba Field which lies 130 miles to the north east of Aberdeen.

The study emphasises the way in which Chevron has progressed from a slow moving system of communications, based on functional lines in sequential stages, to an improved way of working, based on decision-making in empowered interdisciplinary teams. This approach allows quick, incisive thinking and adoption of appropriate technical solutions to oil extraction.

Introduction to the oil industry

The oil industry is one of the major sectors of the UK economy, employing, directly and indirectly, 380,000 people. Currently a fifth of all industrial investment in the UK (£4 billion per annum) comes from the oil and gas industry. Britain’s offshore industry produces some 80% of the country’s total primary energy (but generates only 3% of the UK’s atmospheric emissions of carbon dioxide and methane). £150 billion in oil and gas taxes has flowed into the Inland Revenue since 1970. Oil by-products provide the basis for many modern products - cosmetics, detergent, contact lenses, coatings for pills, non-stick pans, CDs, fertilisers, fabrics, paint and insulation materials for the home - to name but a few. The North Sea oil fields have made one of the most significant contributions to the UK economy over the past 25 years.

The oil industry is split into a number of upstream and downstream activities. Upstream refers to the raw material end of the business and includes all activity directed at the finding and production of crude oil and its delivery to the refinery. Downstream refers to all activity directed at the manufacture of refined products and their marketing and delivery to customers. This case study focuses on the decision-making processes at Chevron, which operates only upstream in the UK.